Qualcomm licensing trial begins with Apple in search of $27 billion in damages

(Reuters) — Apple and its allies on Monday will kick off a jury trial towards chip provider Qualcomm in San Diego, alleging that Qualcomm engaged in unlawful patent licensing practices and in search of as much as $27 billion in damages.

Qualcomm, for its half, alleges that Apple pressured its longtime enterprise companions to stop paying some royalties and is in search of as much as $15 billion.

Filed by Apple in early 2017, the lawsuit in federal courtroom revolves across the modem chips that join gadgets just like the iPhone or Apple Watch to wi-fi information networks. Qualcomm has spent the previous two years mounting a strain marketing campaign of smaller authorized skirmishes towards Apple, in search of — and in some instances acquiring — iPhone gross sales bans for violating its patents.

The trial earlier than Decide Gonzalo Curiel will play out on Qualcomm’s residence turf of San Diego, the place for many years the town’s Nationwide Soccer League staff performed in Qualcomm Stadium and almost each enterprise district hosts the cellular chip agency’s brand.

For Apple, the trial is in regards to the freedom to find out its personal expertise path for blockbuster merchandise by shopping for chips with out having to pay what it calls a “tax” on its improvements within the type of patent licensing charges to Qualcomm that take a reduce of the promoting value of its gadgets.

For Qualcomm, the trial, together with comparable allegations from U.S. regulators in a January courtroom listening to, will decide the destiny of its distinctive mix of promoting chips and licensing greater than 130,000 patents.

Licensing generates most of Qualcomm’s income. The mannequin propelled Qualcomm from a small contract analysis and improvement store when based in 1985 to a world chip powerhouse essential sufficient to U.S. nationwide safety that President Donald Trump personally intervened to forestall a hostile takeover of the corporate final yr.

“That is the day of reckoning that Qualcomm has been very lucky to keep away from for a few years,” mentioned Gaston Kroub, a patent legal professional with Kroub, Silbersher & Kolmykov who just isn’t concerned within the case. “In Apple, they’ve lastly come up towards a possible licensee that has the sources and the desire to place Qualcomm’s enterprise mannequin and licensing practices on trial.”

Qualcomm requires system makers to signal a license to its patents earlier than it is going to provide chips, which it views as a commonsense measure to make sure it doesn’t do enterprise with corporations violating its patents. However Apple and different system makers all over the world have referred to as the “no license, no chips” coverage a type of “double dipping” — that’s, charging for a similar mental property as soon as throughout licensing discussions, after which once more within the value of the chips the place the patents are embodied.

Apple and allies are asking for an finish to that follow and a refund of about $9 billion — an quantity that could possibly be tripled if a jury finds in Apple’s favor for antitrust allegations — for contract factories comparable to Foxconn, who paid the royalties and have been reimbursed by Apple. Apple alleges the practices saved rivals like Intel out of the marketplace for years.

“Even very massive corporations like Intel have felt at an obstacle,” mentioned Michael Salzman, an antitrust legal professional with Hughes Hubbard & Reed not concerned within the case.

Qualcomm will argue that it had been working efficiently with contract factories for years earlier than Apple launched its iPhone. However Apple used its heft within the business to get these factories to interrupt their longstanding contracts with Qualcomm, depriving it of not less than $7 billion in royalties it was due, the chip provider alleges.

The chip provider can even argue that its licensing practices have been constant for many years and solely got here beneath hearth when Apple, identified within the electronics business for pushing suppliers to comprise prices, took challenge with it. A victory would safe Qualcomm’s standing as a serious expertise supplier for 5G, the following technology of cellular information networks coming on-line this yr.

“I don’t assume (a Qualcomm victory) can be nice for Apple, but when it’s about cash, they’ve obtained loads of cash,” mentioned Stacy Rasgon, an fairness analyst for Bernstein who follows Qualcomm. “For Qualcomm, it’s an existential assault on the meat of their enterprise mannequin.”